And Why SMEs Need Auditing

In our previous blog we discussed audit exemptions for small companies in Singapore. Here we will discuss the advantages of conducting audit assurance. Business owners should view an audit of financial statements as an investment. Even if not required by law, there are numerous advantages to conducting audit assurance.

Before we discuss in detail the benefits of audit, here is a visual summary of the advantages of conducting audit assurance.

There are compelling advantages to conducting audit assurance for both large and small companies to invest in audits:

1. Satisfy Stakeholders – Employees, customers, suppliers, shareholders or minority shareholders and other interest groups that the company is accountable to.
2. Loan Processing – Bankers require audited accounts for loan processing. Audits enable the companies to comply with banking requirements for covenants.
3. Attracts Investors – Potential investors want to review audited accounts for investing or sales purposes;
4. Easy Sale and Purchase – Facilitate the purchase and sale of the business after the company account is audited.
5. Procuring Tenders – Audited accounts are useful for tendering of both government and private contracts. Audits provide more credible and higher quality financial information.
6. Detect Fraud – Help deter and detect material fraud and error, usually perpetuated by employees.
7. Easy Tax Payment – Facilitate the payment of corporate tax, goods and services tax, and other taxes on time and accurately, thereby avoiding interest, penalties and investigations.
8. Spin-Off Benefits – Take advantage of the spin-off benefits such as advice on the structure and optimised operations of business from the auditors, and also get updates on the latest FRS and relevant changes in the Companies Act.
9. Good Corporate Governance – Demonstrate good corporate governance and prestige.

Special Reasons Why Smaller Companies Need Audits

1. Small companies might prepare their own accounts but often need help in arriving at adjustments, such as obsolete stock, depreciation, bad debt, review of accruals and other provisions.
2. The close involvement of the auditor provides companies with a level of comfort when faced with tax and regulatory investigations.
3. Small companies get spin-off benefits for an audit. The auditor usually advises on other areas like the latest tax changes, GST, account preparation, personnel tax matters, corporate secretarial matters, etc.
4. Small firms can tap audit firms for miscellaneous functions like valuation, liquidation, replying to income tax queries, etc.
5. Annual audits keep the accounts department on its “toes’’ as an independent auditor reviews their work and provides feedback to the management. This puts pressure on the accounts department to keep accounts up-to-date, with good documentation and fewer errors and fraud.
6. If the auditors are involved in the preparation of the statutory accounts on behalf of management, the cost of the audit is often affordable for small companies.

A small annual expenditure on audit assurance can bring a number of advantages for both big and small companies. The advantages for conducting audit assurance are many for smaller companies as they are new to business and often benefit from value-added suggestions for maintaining a strong financial condition.

If you need more information on audit assurance or audit exemptions please reach out. We can help.

Alternatively, if you require an Audit Quotation please fill out our short form and we’ll be in touch as soon as possible.